Given his track record, a guide to economic forecasting
would have to be the worst present he could bring.

Yet that’s exactly what the former Federal Reserve Board
chief delivers in his clueless new book, “The Map and the
Territory.” A guide to economic forecasting by Greenspan is
about as credible as art history by Mr. Magoo.

Let’s review. As Fed chairman until 2006, practically the
eve of the financial crisis, Greenspan couldn’t see the storm on
the horizon.

Despite his mastery of the techniques described at somewhat
numbing length in his book, he failed to draw any useful
conclusions from a host of indicators that were pointing to
trouble.

Omens were plentiful: the bubble in housing prices, the
gross inadequacy of banking capital, the systemic risks of
money-market funds, the explosive dangers of complex
derivatives, the rise of an enormous and poorly regulated shadow
banking system, the transparent pandering of the bond-rating
companies, the collapse in mortgage-lending standards and the
massive overleveraging of U.S. consumers.

Historic Failure

“The Map and the Territory” pretends to tackle the
subject of forecasting while saying next to nothing about the
author’s historic failure to reduce the risks leading to the
crisis, which he calls “almost universally unanticipated.”

Resorting all too freely to the first person plural,
Greenspan describes the book as “an effort to understand how we
all got it so wrong, and what we can learn from the fact that we
did.”

The remarkable thing is that Greenspan continues to get it
wrong.

He acknowledges that banks ought to hold more capital but
argues in effect that the real problem is too much government --
and too many entitlements, especially “social benefits” like
Social Security and Medicare.

If only these had been held to “a still large 4.7
percent” of GDP, their level in 1965, instead of reaching
almost 15 percent in 2012 (never mind an aging society and
soaring health-care costs), “little of the fiscal chaos we are
now experiencing would have found its way to the front burner of
public policy.”

“Fiscal chaos” is what we had in 2008, and it had nothing
to do with Social Security.

Federal Deficits

For someone so exercised about federal deficits, Greenspan
is strangely silent on his own role in the Bush tax cuts, which
might not have been adopted in 2001 (further cuts came in 2003)
without his blessing for the general concept.

And there’s the Great Recession, which might not have
occurred had he recommended, while he was Fed chief, higher
capital requirements for banks, better regulation of derivatives
and a crackdown on subprime lending.

Greenspan’s plodding text oscillates maddeningly between
equivocation and chutzpah. He implies that it was a mistake to
bail out the big banks in 2008, yet doesn’t say what he would
have done instead, leaving us to wonder if, in Ben Bernanke’s
shoes, he would have let the global financial system go up in
flames.

Clearly the author is worried about moral hazard, which
occurs when firms or people are encouraged to take excessive
risks because they know others will bear the consequences.

But this is an odd concern from the man whose actions as
Fed chief gave rise to faith in the “Greenspan put,” the
notion that, while he was in office, the central bank would rush
to float sinking markets with lower interest rates whenever they
faltered.

“The Map and the Territory” is an infuriating book, one
that will leave readers wondering how its author could have come
all this way and yet remain so hopelessly lost.

“The Map and the Territory: Risk, Human Nature, and the
Future of Forecasting” is published by Penguin Press (388
pages, $36). To buy this book in North America, click here.

(Daniel Akst writes for Muse, the arts and leisure section
of Bloomberg News. The opinions expressed are his own.)

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